The IPO market will take the slow road to recovery

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There are some sages who have long predicted that 2025 – not 2024 – will be the year to watch for IPOs. More joined them as the deal flow remained depressingly soft. Will 2025 really be better? IPOs like certainty. There is not much of it in perspective.

The looming US election makes the end of the September quarter a good point to call the IPO class of 2024. Few executives will be prepared to risk the more choppy markets that typically surround November votes. So far this year, companies have raised about $26 billion by going public in New York, including social media group Reddit and cruise operator Viking. That tops the $20 billion raised in all of last year, and pales in comparison to the $8 billion in 2022. But it’s still the kind of amount that was raised every six months in the years before the 2020-21 boom.

The argument for 2025 is that companies have still spent this year dealing with the fallout from that time. Ratings required for deflation. Executives had to shift from talking about top line growth and start discussing plans for net profitability. If 2022, when the S&P fell 19 percent, was the stuff of startup nightmares, then 2023’s 24 percent rise, despite recession fears (yet to materialize), caught them off guard.

That left 2024, constrained by the November election, to prepare for a slate. There are probably a handful of companies that regret not being ready sooner: the strong markets between March and June this year could have probably supported more deals than landed.

The IPO market is a way to make a living. Take 2014, when Alibaba’s $25 billion fleet is skewing the numbers. In 1999, when BlackRock and Goldman floated alongside the telecom stars, those names were weakened by the then-record $5.5 billion UPS deal.

However, the past two years have been quiet by any measure. This time, an IPO recovery is based more on some predictability than a rising market. As the August crash showed, it doesn’t take more than a few economic releases to trigger wild moves. The Fed this month made it clear that it too will react to future data. That leaves wannabe listers trying to plan IPOs to fit neatly between mood-altering monthly jobs reports.

Forget 2024. But the IPO recovery is coming — maybe not as fast as some hope.

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